The Times and FT predictably report today’s proposal for a temporary customs union with the EU during the transition period as a victory for Philip Hammond. Is this true? Back in June Guido told you what most Tory Leavers want:

“Leavers want Britain fully out of the single market and customs union within two or three years, well in time for the next election. Tory MPs are concerned that the public will want to see progress on immigration and trade deals by the time they next vote. One of David Davis’ main reasons for lobbying Theresa May to call a snap election was so Brexit could be fully completed by the next election.”

DD’s proposal clearly meets the requirements of Tory Leavers so long as the transition period is short, time-limited and trade deals can be struck well in time for the next election, so voters can see evidence of progress in Brexit Britain. Guido has spoken to various Leave Tory sources this morning who support today’s plan so long as the implementation phase is as brief as possible and those trade deals can be struck with time to spare. As has always been the case. Backbench Brexiter Bernard Jenkin sums up the view of Tory Leavers:

“Anything that smooths our exit and gives business reassurance is good but it depends how long this transition period is. We must not look hobbled in our trading relationships with non-EU countries.”

Privately Tory Leavers feel these “victory for Hammond” headlines on policies they also support are a price worth paying to help build consensus. Last month Remain papers called the transition itself a victory for Hammond, even though the vast majority of Tory Leavers support it. The reality is a transition has always been sensible and inevitable, supported by Tory Leavers so long as their conditions are met. Today’s proposal meets those conditions on paper, over to the EU…

Back in June, Guido told you a consensus was forming between Hammond, Fox et al on a time-limited 2-3 year transition outside the single market and customs union. As other publications breathlessly reported on Cabinet splits and Brexit coming off the rails, we wrote:

“Everyone in government including Philip Hammond agrees on a destination outside the single market and customs union… Hammond and Leavers now agree on a “softer landing”, so long as the transition is short and time-limited… this seems to Guido a sensible approach for a smooth, real Brexit.”

Yesterday Hammond and Fox dashed the hopes of the less reality-based Remainers, writing a joint article for the Sunday Telegraph confirming what Guido readers already knew:

“We will leave the customs union and be free to negotiate the best trade deals around the world as an independent, open, trading nation. We will leave the single market, because there was a vote for change on June 23rd and that is what we will deliver… We believe a time-limited interim period will be important to further our national interest and give business greater certainty – but it cannot be indefinite; it cannot be a back door to staying in the EU.”

A lot of what is being published by the FT, Guardian and Evening Standard at the moment is wishful thinking, and sometimes just plain wrong. For weeks they reported the government was being torn apart by splits over the transition. Then Osborne’s Standard praised Hammond for securing victory on the transition and said the government had made the “right call”. Today Remainers are moaning Hammond has “caved in”. The reality has been clear for some time for those willing to see it: a time-limited 2-3 year transition outside the single market and customs union. As Guido readers have known for months…

There is a huge amount of guff being written after Philip Hammond confirmed plans for a two to three year Brexit transition period. George Osborne’s Evening Standard asks “Does Brexit still mean Brexit?”. The New Statesman talks of a “lost battle” for Brexiters. Other prominent Remainers on Twitter are talking this up as a win for them and a defeat for Leavers. As with so much of the frankly dire Brexit analysis in the media at the moment, this is complete rubbish.

Guido readers will know that Tory Leavers supported a time-limited transition lasting two or three years, at the end of which we are fully out of the single market and customs union. That is what we wrote last month. It is essentially exactly what Hammond has announced today. The key for Leavers is that the transition is just that – a transition to Brexit and not a means of keeping us in the institutions of the EU indefinitely. Hammond today agreed it must be over by 2022.

The destination is the same: a clean, proper Brexit. Sensible Leavers are perfectly fine with a journey lasting two or three years to make sure we get there smoothly. Worth reading Andrew Lilico on this. Liam Fox – no Brexit sell out – said the same on Marr on Sunday. David Davis has just hired Stewart Jackson to help run the Brexit department, hardly a sign they are about to betray Leave voters. There is so much nonsense and Remainer wishful thinking being written by people who should know better – if you read Guido’s post from last month you will know today’s announcement is no evidence of a Brexit betrayal. To answer Osborne’s question: “Does Brexit still mean Brexit?” Sorry George, yes it does…

On Marr Phil Hammond claimed the briefing against him in the weekend papers is coming from Brexiteers: “people who are not happy with the agenda that I have tried to advance of ensuring that we achieve a Brexit which is focused of protecting our economy”. Andrew Marr replied “I think you can guess” who that means. This might fit the narrative of Hammond, the BBC and excitable Twitter Remainers, but it isn’t true…

Tim Shipman, the Sunday Times pol ed who received today’s anti-Hammond briefing, has shot down the theory:

“Some will see this as a plot by Brexiteers to undermine the leading remainer in the cabinet. All I can say is that the majority of my sources are not Brexiteers. Others will see a plot by Hammond’s leadership rivals to kill off his chances. Again, my sourcing doesn’t stack that up.”

A Brexiteer plot against Hammond carried out by Remainers? That’s a new one…

The Treasury is getting three new Special Advisers following the departure of Philip Hammond’s long-serving aides Graham Hook and Hayden Allan. As reported by the Sunday Times, Hammond has appointed former Treasury minister Jane Ellison, who lost her seat at the election, as an adviser to shore up his position in parliament. Tim Pitt is moving to the Treasury from the Ministry of Justice. He worked with the new Chief Secretary to the Treasury Liz Truss at the MoJ, and is expected to have a combined role advising Hammond and Truss. Kane Daniell, an enterprising CCHQ aide, is also expected to move to the Treasury.

“A compromise is the art of dividing a cake in such a way that everyone believes he has the biggest piece. Wise words with some applicability to the Brexit negotiations although I try to discourage talk of “cake” amongst my colleagues.”

During his Today programme interview this morning Philip Hammond all but confirmed his desire for a three or four year transitional arrangement which wouldn’t see us fully leave the European Union until 2022 or 2023. Perhaps even more revealing was his choice of metaphor:

“When you buy a house you don’t move all your stuff in on the first day.”

Philip Hammond’s Mansion House speech this morning was sound in its rhetoric. “We must make anew the case for a market economy and for sound money,” he said, warning that “higher taxes and higher borrowing” must be rejected, taxes must be kept “as low as possible” or else they will “slow growth, undermine competitiveness, and cost jobs”. He repeated this language at Cabinet, telling colleagues of the “importance of making the case for a market economy and sound money”. This is all positive rhetoric. The policy truth is alas very different.

Hammond confirmed this morning that he still wants to push back closing the deficit until 2025, ten years later than the Tories promised. The Tories have added £500 billion to the national debt in 7 years, Hammond now plans to add a billion a week to the burden. That is not “sound money” by any definition of the term.

Taxes have risen under the Tories. The claim by the Tories to be a low tax party has not been true this century. They raised VAT almost immediately upon coming into office. They argue they have cut business taxes, yet they raised dividend taxes on small business owners and tried to raise National Insurance contributions. Hammond ditched the triple tax lock at the election. He has signalled further tax rises are likely. The tax burden under this Chancellor will rise to its highest level since 1969. That is not keeping taxes “as low as possible”.

Hammond is sounder on economics than Theresa May and her former aides. Talking up the “market economy” is clearly a slap down of the PM’s failed attempt at interventionism in the manifesto. Though his claim to be funding public services by anything other than more borrowing and more taxes is sadly all spin…

Remember when May and Hammond ditched the Tory tax lock and replaced it with a mere “firm intention” not to raise taxes? Today Hammond makes the most of that wriggle room and warns: “We’ve never said we won’t raise some taxes”. (Though he also cancelled the Budget.) The Tory record is already more debt and more taxes and the highest tax burden for decades. Hammond had already extended the deficit reduction horizon to 2025, now he is talking about ending austerity. This is entirely the wrong inference from their failure on June 8 and it is starting to concern more economically sensible Tory MPs…

Philip Hammond has poured cold water on those stories in the Remain newspapers this week and backed a real Brexit outside the single market and customs union. In other words, the Chancellor has agreed with the government and voters that we should properly leave the EU. Sorry Remainers…

Today’s Times reports Philip Hammond is again scheming to keep Britain in the customs union. A senior Whitehall source tells Guido that, back before the government announced it would take Britain out of the customs union in January, Hammond met with Theresa May and David Davis and lobbied them to keep the UK inside. He was told Britain had to leave the customs union to respect the referendum result. (The ability to strike free trade deals with other nations – impossible inside the customs union – being a key aspect of Brexit.) Hammond accepted this publicly:

“The decision to leave the European Union has changed the game. It’s clear that we can’t stay in the customs union and wasting a lot of political capital arguing about that will not be fruitful.”

The customs union is a protectionist barrier to free trade with the 162 countries outside the EU. Don’t fall for the hype that it reduces trade barriers. Garlic has a 200% external tariff to protect French farmers, some US jeans face a 26% tariff, shoes face 17% tariffs to protect Italian cobblers. Some agricultural products, e.g. beef and dairy, have very substantial tariff rates, 54 dairy products alone have tariff rates of more than 75%. The customs union only liberalises internal trade within the EU.

We had this debate during the referendum – and leaving the customs union won. The Cabinet had this debate in January – and leaving the customs union won. Yesterday ministers from DexEU and DIT promised Britain would take control of trade policy – that means leaving the customs union. Cabinet agreed. Come on Phil, listen to your own advice and don’t waste time going down the Remoaner road of Hilary Benn and Chuka Umunna…

Philip Hammond’s long-serving Special Adviser Graham Hook has left government. Hook, a dependable and highly-experienced Whitehall veteran who has worked across four departments, served under Hammond since 2012 and will be a major loss to the Chancellor. Guido hears he left in May and has joined the Investment Association. This is the second major SpAd departure from the Treasury after Hayden Allan left in April. Does not bode well for Hammond ahead of the post-election reshuffle…

Today’s Tory manifesto will pledge to eliminate the deficit by 2025, several years later than Philip Hammond vowed just a few months ago and 10 years later than the Tories promised back in 2010. When Hammond became Chancellor he said he would clear the deficit by the early 2020s, in his Budget in March he said the deficit would fall to 0.7% of GDP by 2021-22. Now the Tories say the books will not be balanced until 2025, the middle of the next decade…

George Osborne consistently failed to achieve his deficit forecasts in the last parliament – the deficit in 2015 was almost five times what he envisaged in 2010. The Tories used to say Labour would “load debts onto our children that they can never hope to repay”, May and Hammond now warn voters of Corbyn and McDonnell’s policies: “Where’s the money coming from?” The answer is the same place they get it, the deficit. It isn’t just Corbyn and McDonnell’s Labour who are an anti-austerity party…

Asked by both the BBC and then ITV whether Philip Hammond would be staying as Chancellor after the election, Theresa May refused to back him. The second time she just let Hammond answer for himself. Asked a third time to give an endorsement of the Chancellor, May replied: “Happy to do so. We’ve worked together for many years, longer than we would care to identify”. Which is the opposite of ringing. May and Hammond called a press conference to talk about Jeremy Corbyn and ended up with a story about the Chancellor fighting for his career… So much for strong and stable…

Philip Hammond on the Today programme repeatedly refused to deny reports of rows with Theresa May’s aides, in particular Nick Timothy, and even let slip that he had “occasionally sworn”. When they call it “tittle-tattle” you know it’s true…

As is traditional in elections the Tories are warning that Labour will bring more debt and more taxes. That is a given, however what is the Tory record after 7 years?

In 2010 the Tories promised to close the deficit by 2015. They failed to do that, so Osborne shifted the goal posts to aim for 2017/18. Under Hammond the OBR now says the government is unlikely to balance the budget by 2026. If the political will had been there they could have balanced the budget; from a worse position over the same period Ireland managed to balance the budget and cut the debt. Ireland now has a lower debt to GDP ratio than the UK and a higher GDP growth rate. The repeated Tory failure to balance the budget means that the national debt continues to rise and is now 89% of GDP. The Tories have added £500 billion to the national debt in 7 years, Hammond plans to add a billion a week to the national debt under Theresa May...

Taxes have risen under the Tories. The claim by the Tories to be a low tax party has not been true this century. They raised VAT almost immediately upon coming into office. They argue they have cut business taxes, yet they raised dividend taxes on small business owners and tried to raise National Insurance contributions. To be fair it is a mixed bag, some taxes have gone up, others down. According to the OECD the overall tax-to-GDP ratio has risen from 31.5% of GDP under Gordon Brown to 32.5% under George Osborne. Taxes have risen under the Tories…

This is not to say debt and taxes would not rise catastrophically under Labour. If you want to balance the budget you have to cut spending, George Osborne used to say privately that the Tories wouldn’t get re-elected if he slashed spending. Enda Kenny cut Irish government spending by 10% and GDP growth has been much faster than in the UK. He got re-elected and is the longest serving Fine Gael prime minister in Irish history.

No surprise: Hammond tells the BBC he needs “flexibility” in the manifesto, so the 2015 pledge not to raise income tax, NI or VAT looks like it’s going out of the window. Hilariously John McDonnell is now attacking the Tory tax bombshell: “You can’t trust the Tories on tax – we can expect a tax bombshell if they get re-elected.” McDonnell is attacking the Tories for raising taxes, threatening pensions and not closing the deficit quickly enough.[…] Read the rest